Educational Articles

Staffing Analytics: A Growing Science

George M. Lee
| May 27, 2014

Human resources (HR) and staffing professionals are tasked with a deceptively simple goal – manage employee issues so that management can focus their time and energies on the core operations for the business. As more companies outsource a greater portion of their HR duties, specialized providers of these services have experienced very nice growth. At the core of these recent successes lies the nascent field of staffing analytics that promises to incorporate advanced big data methodologies. Investors who are considering companies in the Staffing and HR industry will want to keep an eye on this exciting area of the business.

Technological developments have allowed many companies to outsource their HR operations. At one time, these human resource functions were kept exclusively in-house and closely guarded due to security concerns. These days, sophisticated technologies like cloud solutions promise both easy and secure access. Clients also benefit from the cost savings that come from increased efficiency and higher-quality hires.

The role HR departments play have traditionally been undervalued in business. Most executives will agree that finding and retaining proper talent is one of the most critical determinants for a company’s success. From front-line sales personnel to senior executive leadership, staffing transitions can adversely interrupt regular business operations. Effective staffing deployments are able to minimize both the magnitude and frequency of these disruptions.

Challenging business conditions in recent years have caused many companies to look for additional ways to trim costs and improve profitability. By outsourcing a portion of their staffing process, companies are often able to tap into broader pools of talent and recruitment expertise. Providers of staffing services, such as Kelly Services (KELYA), Korn/Ferry International (KFY), ManpowerGroup (MAN), and Robert Half International (RHI) have benefited from this trend.

As these staffing companies compete for new and existing clients, many have started to become more quantitatively oriented. Predictive data analytics can improve fill rates by identifying candidates that are more likely to succeed at a given position. This should also result in higher quality fills that result in lower turnover down the line and lower costs.

The current trend towards greater data collection and more stringent accountability permeates all aspects of modern businesses, so staffing efforts should be no different. Anecdotal evidence is nice, but quantifiable results and methodologies allow staffing companies to make a more concrete value proposition to decision makers and potential customers.

Indeed, ManpowerGroup realized that it had a potential competitive advantage in the data that it was collecting on a regular basis, and proceeded to establish an analytics department in 2010. Since then, the company has enlisted the data-visualization expertise of Tableu Software Inc. (DATA). These days, ManpowerGroup regularly uses data-driven charts and graphs in their business conversations both internally and with customers.

Korn/Ferry International has also garnered a lot of success with its analytics-based assessment services. Among these, Decision Styles has a particularly impressive record. This pre-hiring tool assesses potential candidates using four main components that are then compared to statistically validated Best-in-Class profiles for particular roles. According to an internal longitudinal study, C-level executives that are selected using Decision Styles were not only more likely to stay for at least three years, but were also promoted eight times more often.

As the trend toward big data accelerates, staffing companies that have already incorporated data analytics in their businesses will have an edge. Contrary to fears that this will computerize and generalize the hiring process, effective data collection and analysis can actually personalize the matching process for both prospective employers and employees. Higher quality matches and clearer ROI metrics will strengthen the desire for businesses to employ these external staffing experts. As global competition increases over the long-term, businesses will look for any advantages that they can get. Being able to scientifically quantify what has traditionally been intangible qualities of an ideal employee will provide clear benefits for bottom lines. Investors who are intrigued by this long-term growth story will want to take a closer look at the staffing companies covered by The Value Line Investment Survey.

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.